Restaurant Brands International Inc (NYSE:QSR) Hits Jackpot with Jumbo Burgers
The CEO of Restaurant Brands International Inc (NYSE:QSR), Daniel Schwartz, announced during an earnings call on Wednesday that the company had surpassed profit estimates despite lower-than-expected revenues.
The company’s Burger King Franchise exceeded growth estimates set by FactSet as it recorded an increase in same-store sales as opposed to its Tim Horton’s franchise, which recorded a decline in the same category.
One of the main strategies used by restaurant chains to increase revenues is through product extensions. This is usually achieved by creating new products that are modeled after current products that are already popular, or highly successful.
Restaurant Brands Tim Horton’s franchise created a product extension of its popular baked foods category in the form of nutella products. Other product extensions were cold beverages sold in the summer. The two product extensions were not as popular with Tim Horton’s customers as expected, which led to a decline in same-store sales.
However, the Burger King Franchise created a product extension in the form of jumbo burgers in its premium burger category, which includes Mushroom & Swiss King, Bacon King and Steakhouse King. The product extensions were quite successful leading to a 3.9% increase in same-store sales at Burger King Franchises.
The company is integrating lessons learnt from the success of its Burger King Franchises to marketing its less successful franchises, that is, Tim Horton’s and Popeyes, both of which reported declining same-store sales.
The success of most restaurant chains is largely based on their marketing efforts by creating advertising that appeals to the desires of their target customers. However, promotion is only part of solution, as customers have to like the taste of the new products in order to boost same-store sales.
In order to hit a jackpot with its new product offerings, Restaurant Brands must understand the tastes and preferences of its customers by conducting extensive research in order to create products that resonate with its customers.
Restaurant Brands is currently focused on promoting its new product offerings in order to boost sales for the third and fourth quarters.
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